A flurry of ESG ETF launches and a stablecoin using $250m of ETFs made headlines this week
ETF issuers remain committed to building out their ESG ETF rosters with 21 new products in just five days, despite market volatility and waning investor enthusiasm for ‘light green’ ETFs.
On Monday, Fineco Asset Management entered the European market with ESG leaders equity ETFs targeting global information technology, consumer staples and financials companies. It also launched six socially responsible investing (SRI) high yield and investment grade corporate bond strategies.
Eight of the 11 ETFs it has debuted on the Borsa Italiana are categorised under Sustainable Finance Disclosure Regulation (SFDR) as Article 8.
On Wednesday, Amundi continued the feverish roll-out of its green ETF range, launching 10 sector ETFs tracking S&P Dow Jones Indices ESG benchmarks with a €600m seeding from a Dutch investor, ETF Stream revealed.
This came just nine days after the French asset manager ‘completed’ its Paris-aligned range with the launch of an all-country world index ETF, taking its total PAB and climate transition benchmark roster to 29 products.
Thursday then marked a day of launches from major US players. Goldman Sachs Asset Management issued its first ETF of the year in Europe in the shape of a PAB global equity strategy, which set the interesting precedent of being Paris-aligned but only SFDR Article 8, whereas its PAB rivals are predominantly categorised under the ‘darker green’ SFDR Article 9.
It is not clear why this should be the case if the ETF delivers on its carbon reduction pledges unless GSAM is being conservative given the predicted swathes of product downgrades set to accompany phase two of the SFDR.
Shortly after, Vanguard continued its European love affair with ESG ETFs.
Jack Bogle’s passive behemoth, known for targeting low-cost, no-frills beta, has been relatively quiet on the launch front this side of the pond, save for global equity and corporate bond ESG ETFs last year and the North America and Europe ESG equity products this August.
These preceded the ESG emerging market and developed Asia Pacific ESG ETFs launched this Thursday. The launches continue Vanguard’s run of launching nothing but ESG ETFs in Europe since the start of 2021.
As a whole, this week’s ESG launch spree should probably be viewed as issuers fleshing out their ‘light green’ building blocks rather than responding to any specific investor demand.
In February, Brown Brothers Harriman’s annual ETF investor survey found SFDR Article classifications were the number one tool used for assessing ESG products. This is entirely at odds with flows over Q2, where investors pulled €30bn from SFDR funds as a whole, according to Morningstar, as 700 products of varying ESG-worthiness rushed to rubber-stamp themselves with SFDR Article 8 status.
ETFs giving stablecoins legitimacy
Crypto lender MakerDao employed Sygnum as the lead partner in its $500m treasury diversification, to help improve the balance sheet of its DAI stablecoin.
As part of this strategy, Sygnum will work with the Swiss arm of BlackRock to invest $250m into iShares short duration US Treasury ETFs, a decision a spokesperson for the firm partly attributed to the “ready tradability of fixed income ETFs.”
MakerDao’s shift comes as part of an effort to boost its balance sheet’s profitability, given the lack of yield-bearing USDC tokens in its $10.5bn collateral pool are not “strengthening” the firm enough.
It also follows regulation such as the EU’s markets in crypto assets (MiCA), under which the DAI stablecoin would not comply with regulatory reserve requirements.
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